Apple Earnings: Sizing the Office for iPad Opportunity

A good portion of the Microsoft channel is already involved with management, integration and app development for the Apple iOS ecosystem.

With the rollout of the long-awaited Office for iPad in late March, Microsoft finally created a clear bridge for its partners between the Microsoft world that they know well and the huge customer demand for business apps on the world's most dominant tablet.

On an earnings call last night, Apple executives provided some metrics and context that clarified how potentially huge that iPad opportunity could be for Microsoft partners.

Apple CEO Tim Cook, who Tweeted a welcome when Microsoft brought Office to the App Store, enthused some more in response to a financial analyst's question.

"There [are a lot] of alternatives out there from a productivity point of view, some of which we brought to the market, some of which many, many innovative companies have brought," Cook said first in a nod to Apple's own Keynote, Pages and Numbers and the numerous apps that sprang up to meet demand for Office compatibility as former Microsoft CEO Steve Ballmer played Hamlet on whether Office should be or not be in the App Store.

"But I do see that Office is still a very key franchise in the enterprise, in particular. And I think having it on iPad is good, and I wholeheartedly welcome Microsoft to the App Store to sell Office. Our customers are clearly responding in a good way that it's available. So I do think it helps us particularly in the enterprise area," Cook said (quotes courtesy of the Seeking Alpha transcript).

As for Microsoft's lengthy wait before bringing Office to the iPad, Cook was critical. "I believe if it would have been done earlier, it would have been even better for Microsoft, frankly."

Timing aside, an opportunity for Microsoft is an opportunity for Microsoft partners. Some of the numbers and anecdotes shared during the Apple earnings call illustrated what a whopper of an opportunity Office on iPad could be.

First, there's the installed base, which presents opportunities for new Office 365 subscription sales and for new conversations to make sure existing customers are using their subscriptions to light up the free Office for iPad apps.

That installed base is huge. Cook said that Apple has sold 210 million units in the four years since launching the iPad. There was some concern about a sales drop in iPad units from the year-ago quarter to this one, but Apple executives explained most of it away as a channel backlog issue with iPad sell-through trending at nearly the same pace as the year before. Meanwhile, Apple had some very strong numbers to report from emerging markets. Apple probably won't be as dominant in tablets in the next few years, but it is likely to remain dominant for a while.

All those iPads, iPad Airs and iPad minis aren't just sitting in people's living rooms, either. Cook claimed 98 percent of Fortune 500 companies use iPad in some capacity and said, "According to Good Technology, who looks at activation of tablets, the latest data we have from them is that 91 percent of activation of tablets in enterprise were iPads."

There's more than a breadth opportunity in Office 365 subscriptions. All along, some partners have taken advantage of the general iOS development opportunity. Now that opportunity is greatly expanded by the ability to create custom corporate apps that integrate with Office -- something that's right in many Microsoft partners' wheelhouse.

That depth was evident as Luca Maestri, vice president of finance and corporate controller for Apple, read through a laundry list of huge customers using iPads. The raw numbers deployed were impressive, such as 20,000 iPads at Eli Lilly and 11,000 units at the U.S. Department of Veterans Affairs. The Eli Lilly example was especially interesting because the company has deployed 50 internal apps as part of a laptop replacement program. (Some enterprises have similarly huge iOS internal app counts primarily for iPhone: 40 at Deutsche Bank and 50 for Siemens.)

The amount of repeatable business that could be available to partners who successfully develop IP and best practices around custom iOS apps leveraging Office for iPad is potentially massive.

Having a clean version of Office available for iPad makes the Microsoft partner opportunities much clearer, and Apple's impressive ability to keep driving huge volumes of tablet sales makes those clear opportunities big.

Posted by Scott Bekker on April 24, 2014